Proceedings of the 7th WSEAS International Conference on Simulation, Modelling and Optimization, Beijing, China, September 15-17, 2007

Mining Airline Data for CRM Strategies

LENA MAALOUF, NASHAT MANSOUR
Division of Computer Science and Mathematics, Lebanese American University,
Mme Curie St., Kreitem, Beirut, LEBANON
E-mail: nmansour@lau.edu.lb

Abstract: In this paper, we apply data mining techniques to real airline frequent flyer data in order to derive
customer relationship management (CRM) recommendations and strategies. Clustering techniques group
customers by services, mileage, and membership. Association rules techniques locate associations between the
services that were purchased. Our results show the different categories of customer members in the frequent flyer
program. For each group of these customers, we can analyze customer behavior and determine relevant business
strategies. Knowing the preferences and buying behaviors of customers allow marketing specialists to improve
campaign strategy, increase response and manage campaign costs by using targeting procedures, and facilitate
cross-selling, and up-selling.
Key-words: customer relationship management, data mining, decision support, intelligent information processing.

1 Introduction
The variety of offers and availability of
communication
technologies
provide
airline
customers the power to access information on
competitors, products, availability, and prices. Due to
these factors, airline business has to become customer
centric. Companies have to identify the most valuable
customers and the appropriate strategies to use in
developing relationships with these customers. Such
strategies would include developing one-to-one
relationship
with
customers
using
market
segmentation
and
Customer
Relationship
Management (CRM). Lee [4] defines CRM as a
concept that has been developed from marketing
theory offering an interaction of the entire business
with customers. CRM is a management model that
has the potential of converting a production-driven
airline into a customer-driven airline in order to
significantly raise the airlines efficiency and
effectiveness.
Customer acquisition deals with profiling,
segmentation, and ranking of customers based on
tendency to buy, order frequency, and purchasing
behavior. Segmentation is the process of separating
customers into groups according to common
characteristics so that marketing and operational
strategies can be targeted to specific populations [3].
The airline data we consider consist of frequent
flyer data for which decisions require processing of a
large amount of data. Often, airlines use methods
based on human expertise and, thus, developing
computerized solutions are badly needed. We propose

using data mining techniques for analyzing real-world

frequent-flyer data. Previous work in this field is
minimal. The objectives of previous works on mining
frequent flyer airline data have been: (a) categorizing
customers into groups based on sectors most
frequently flown, class flown, period of year,
hometown compared to sector flown [6]; (b)
classifying trip purposes into leisure, business, etc
[5]; (c) addressing airline ticket prices behavior over
time [2].
Our objective is to explore the Frequent Flyer
database using data mining (DM) methods in order to
prepare for CRM implementation. We have also used
the Cross-Industry Standard Process for Data Mining
(CRISP-DM) process cycle. Our contribution in this
paper is based on the following: (a) Selected data
mining techniques (clustering and association rules)
are applied to Frequent Flyer airline data with new
CRM objectives; (b) A preprocessing technique is
used for processing the huge amount of data for a
feasible application of DM techniques; (c) We use
real data from MEA airlines and conduct
experimental work for validating our techniques.

2 Problem and Data Description

2.1 Data Description
The goal of our study is to extract business and CRM
strategies for an airline company. The data source is
the frequent flyer program. Frequent flyer programs
data allow getting a better understanding of customer
types and behaviors. The program intends to identify

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Proceedings of the 7th WSEAS International Conference on Simulation, Modelling and Optimization, Beijing, China, September 15-17, 2007

high value customers and provide them with special

services and benefits such as upgrades.
In this study, the Frequent Flyer Program is an air
miles reward program including, in addition to the
flight services, a financial service of a credit card and
a hotel service. Each time a passenger uses the
dedicated credit card for any transaction or has a stay
in the dedicated hotel, he/she will win additional miles
in the reward program. Due to agreements with banks
and hotels, the airline generates revenue. Additional
services are provided to the passenger such as
Adjustment, Miscellaneous, Multi, Program and
Reward Claim. Adjustment is used to rectify errors
when it occurs with mileage calculation.
Miscellaneous covers compensation for delay, survey
and others. Multi is available only for Elite and
President Club members. It is a mileage bonus given
when the passenger uses a group of services such as 3
dedicated flights or 5 flights in a special class.
Program groups the mileage received due to
promotion packages such as class of service program
given double mileage. Customers are divided into four
categories of members. The data used in this study are
based on 1,322,409 customer activities transactions
and 79,782 passengers for a period of 6 years.

2.2 Problem Description

The objective of this study is to help market
specialists in decision-making concerning some of the
key business process questions. For the frequent flyer
customer data, these questions are as follows.
Customer value measurement:
Which customers are the most valuable?
What activities contribute to their value?
Are the most valuable customers receiving an
appropriate allocation of services to retain
them?
Which customers are most promising for a
defined campaign?
What can be done to transform low profit
customers to a position of improved
profitability?
What is the predicted lifetime value by
customer segment?
Customer retention: Define best market segment.
Customer growth:
What customer segment has a potential to
purchase additional travel segment?
Identify
up-selling
and
cross-selling
opportunities
Design packages or grouping of services.
Customer acquisition:
What constitutes a good customer?

What are the attributes and characteristics of

the most valuable customer segments?
Can we match new customers to the right
services?

3 Solution Strategy
The data preparation task includes data cleansing and
preprocessing. The resultant data will be the input for
the data mining process.

3.1 CRISP Implementation

Business goals
Our target customers shall be not only those who
spend much on the airline ticket, but also the valuable
candidates for cross-selling. The main concern is to
understand customers in order to implement new
strategies to different customer segments. The results
can be used for marketing purposes such as
promotions and targeted campaigns, and improving
customer service such as information availability for
call centers.
Data mining goals
Our goal is to develop models that generate passenger
revenue value, based on the booking history. We use
customer transaction data to track buying behavior
and create strategic business initiatives. Business can
use these data to divide customers into clusters.
These clusters highlight marketing opportunities such
as cross-selling (selling new products) and up-selling
(selling more of what customers currently buy).
Data preparation
Data is based on Z-Score Normalization (xnew = (xold shift)/scale). The values for shift and scale are
computed to be shift = mean, and scale = standard
deviation, respectively.
Data transformation and aggregation for
clustering
Several queries have been built to merge the
Activities transaction data to the Individuals
passenger file. These queries create the clustering
input record. The queries determine the manipulation
done on the transaction data. It includes pivoting,
aggregating, and inserting into each passenger record.
We discard customer records with missing values.
The records remaining are 50,830 records.
Data transformation and aggregation for
association rules
The result generated by clustering provides customer
segmentation with respect to important dimensions of

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Proceedings of the 7th WSEAS International Conference on Simulation, Modelling and Optimization, Beijing, China, September 15-17, 2007

customers needs and value. Two different approaches

have been used for association rules application. Each
approach is based on different data.
Approach Based on Original Activities
In the clustering process; the Customer ID, Flight,
Financial, and Hotel activities are used as services
purchased by customers. A query (Q5) is used to
group all the Frequent Flyer Customer information.
Query (Q6) is based on a selected Cluster and Q5. It
groups best customers information.
Approach Based on Flight Activities Only
In the second approach, we consider only the Flight
activity from our best customer (Selected Cluster) to
study and analyze the sector used taking into account
that the originating airport have to be one of our main
Hubs. A query (Q7), based on Activities table,
includes the Customer ID, Sector (concatenation of
Origin and Destination), Origin (must be one of our
main Hubs only), Destination, and the Activity Type
(Flight only). It groups Customer information by
Sector. Query (Q8) is based on Selected Cluster and
Q7. It includes the Customer ID, and sector used only
by the Selected Cluster customers. It groups best
customers information.
Model building and evaluation
Using a data mining tool, we apply clustering and
association rules techniques [1] in order to generate
marketing and CRM strategies. Behavioral clustering
help derive strategic marketing initiatives using the
variables that determine customer value. By
conducting association rules within behavioral
segments, we can define tactical campaigns.
The clustering techniques used are the k-means
and O-Cluster algorithms. We use the Apriori
algorithm for association rules mining.

4
4.1

Experimental Results
K-Means Clustering

In our study, we have used the Oracle Tool called

Oracle Data Miner (ODM). The first step in the
clustering process is to choose the basic run
parameters for the K-means algorithm. Different
scenarios have been tested. For brevity, we present
only a limited set of results. The algorithms are
applied on Behavioral Clustering query including
50,830 records.
The input variables we selected include:

o Number of services (Financial, Flight, or

Hotel) the customer used over lifetime
(ACTLIFE).
o Number of services (Financial, Flight, or
Hotel) the customer used in the last 12 months
(ACTLASTYEAR).
o Customers revenue mileage contribution over
lifetime (MILEAGE).
o Customer membership period in months. Number
of months since customer first enrolled in the
program (MEMBERSHIP).
o Revenue Mileage / Membership period (RMM).
o Number of services over lifetime / Membership
period (RAM).
The basic parameters available for clustering are:
o Maximum number of clusters.
o Maximum iterations or Maximum number of
passes through the data.
o Minimum Error Tolerance. It must be between
0.001 (slow build) and 0.1 (fast build). Increasing
minimum error tolerance builds models faster, but
with lower accuracy.
The model stops after either the change in error
between two consecutive iterations is less than
minimum error tolerance or the maximum number of
iterations is greater than maximum iterations. For
clustering run, we choose a maximum of 9 clusters; a
maximum of 6 passes through the data, and a
minimum error tolerance of 0.005. Table 1 gives the
details of a sample of two clusters.

4.2 Association Rules

The result generated by k-means clustering are used
as a basis for the association rules algorithm. The first
step in the process is to choose the basic run
parameters for the Apriori algorithm. Two different
scenarios have been applied. The first scenario is
based on Financial, Flight, and Hotel activities
with 1,896 records. The second scenario is based on
the flight activities especially the sectors, with 1,867
records. The results are evaluated using support and
confidence attributes [1].
For association rules, we choose our best
customers cluster, Cluster 16, which has 1,886 records
or customers. The input variables are divided into two
different scenarios depending on the cases studied
with the association rules. The case presented herein
is based on Original Activities using the Query
Original Activities Cluster 16. The Original
Activities Cluster 16 query includes: The Customer
ID; Financial (The value is 1 if the customer has used
the service; otherwise the value is 0); Flight (The

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Proceedings of the 7th WSEAS International Conference on Simulation, Modelling and Optimization, Beijing, China, September 15-17, 2007

value is 1 if the customer has used the service;

otherwise the value is 0); Hotel (The value is 1 if

the customer has used the service; otherwise the value

is 0).

Table 1: Details of Clusters 8 and 16

Cluster
ID
8

Cluster
Level
4

Record
Count
9,414

16

1,239

Attribute
ACTLASTYEAR
ACTLIFE
MEMBERSHIP
ACTLASTYEAR
ACTLIFE
MEMBERSHIP

Centroid
Value
1.02-1.05
1.02-1.05
23.6-24.32
1.98-2.01
2.01-2.04
57.44-58.16

We look for two types of association rules. For the

first one, we keep only the sectors that have a
percentage of use greater than 10%. For the second
one, we keep those greater than 20%.
We implement the Apriori algorithm of ODM to
build association models. The algorithm settings in the
Apriori algorithm depend on the marketing
professional decision. The minimum support controls
the rules produced depending on the application
percentage of this rule on existing data; minimum
confidence controls the production of rules depending
on the probability of having this rule in future data.

Attribute
MILEAGE
RAM
RMM
MILEAGE
RAM
RMM

Centroid Value
12616.56-21492.34
0.0402-0.0469
750.6066-1210.9099
48119.68-56995.46
0.0335-0.0402
750.6066-1210.9099

The algorithm settings are as follows: minimum

support was set to 0.1; minimum confidence was set
to 0.5; number of attributes in each rule was set to 3.
Scenario 1: The run is based on Original Activities
Cluster 16 query. Table 2 displays a sample of the
rules.
Scenario 2: The second scenario is based on
Activities Cluster 16 query. We keep from the
Activities Cluster 16 query the sectors used by the
customer with a percentage greater than 10%. The
remaining number of sector field is 17 sectors. Table 3
gives a sample of the rules.

Table 2: Sample Association Rules for Best Customers Activities (Scenario 1)

Rule Id
3
2
1

If (condition)
FLIGHT=1 and HOTEL=0
FINANCIAL=1 and HOTEL=0
FINANCIAL=1 and FLIGHT=1

Then (association)
FINANCIAL=1
FLIGHT=1
HOTEL=0

Confidence
1
1
0.9907887

Support
0.91251326
0.91251326
0.91251326

Table 3: Association Rules for Best Customers Activities (Scenario 2)

Rule Id
498
494
1228

If (condition)
BEYCAI=1 and BEYDXB=1
BEYAMM=1 and BEYCDG=1
BEYCAI=1 and BEYDXB=1

Then (association)
BEYAMM=1
BEYCAI=1
BEYCDG=1

5 Discussion Of Results
5.1 K-Means Clustering
Table 4 provides a summary of the profile produced
by k-means clustering that includes: revenue mileage,
number of services used, and customer membership
period. The purpose is to quantitatively assess the
potential business value of each cluster and rules by
profiling the aggregate values of the variables by
cluster and rules. We have used the following
parameters for evaluation:

Confidence
0.5799458
0.6005155
0.8157182

Support
0.11462239
0.12479914
0.1612212

o Revenue Mileage percentage = (Total Mileage per

cluster * 100)/ Total Mileage.
o Customer percentage = (Total Customer per
cluster * 100)/ Total Number of Customer.
o Average Service per Cluster = Sum of Act Life /
Total Number of Customer.
o Service Index = Average Service per Cluster /
Average of Different Services used overall.
o Weight or Mileage per Customer = Revenue
Mileage Percentage / Customer Percentage.
o Membership = Sum of Membership per Cluster /
Number of Customer.

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Proceedings of the 7th WSEAS International Conference on Simulation, Modelling and Optimization, Beijing, China, September 15-17, 2007

o Cluster 9 has to be observed closely during some

period of time. It defines a group of new
passengers. We have to collect more data to
determine the behavior of those new passengers.
We have to adopt some marketing efforts to
inform cluster 9 passengers of the frequent flyer
programs products and services in order to
accelerate profitability.
o Cluster 12 is the worst, since its passengers have
very low mileage percentages. These passengers
use very few services even though they have been
with the company for 37 months. The strategy
may be to minimize spending on marketing to this
group.

5.1.1 Clustering Analysis

The most profitable cluster is cluster 16. From Table
4, this cluster groups about 8.88% of the mileage with
only 3.71% of the passengers and has the highest
weight fraction. A valuable business opportunity is
shown in this cluster profile based on increasing the
number of services used by passengers.
It is obvious that clusters 11, 16, and 17 contain
the best customers. These passengers have a higher
mileage per passenger than other clusters, as shown
by the weight column in Table 4. Some possible CRM
strategies would include:
o A retention strategy for best customers (in clusters
11, 16, and 17).
o A cross-selling strategy for cluster 8. Cluster 8 has
a service index close to that of cluster 16. Cluster
16 has the highest number of services used. The
effort needed to convert passengers from cluster 8
to cluster 16 should be minimal, since both
clusters are close in number of services used. The
comparison of services bought by the best
passengers of cluster 16 to those purchased by
cluster 8 passengers would determine services
that are candidates for cross-selling.
o The same cross-selling strategies can be applied
between: 15 and 11; 13 and 17 because they are
close in services value.

5.1.2 Best Route from CDG

The result of clustering was used to prepare data for
association rules. As shown before, based on our best
customers (Cluster 16) we have prepared the query
Activities Cluster 16. This query contains 145
sectors flown by our best customers. The percentage
of each sector flown by customers with origin CDG
shows the preferable routing from the CDG hub. This
approach will be applied on the result given by the kmeans algorithm.

Table 4: Clustering Analysis for K-Means Algorithm

Cluster
ID

Avg. Services
per Cluster

Service
Index

Membership (Sum
Membership/ NB. Customer)

Mileage %

Customers %

17

34.70

17.02

1.00

0.971

2.04

67.87

11

20.62

16.66

1.01

0.977

1.24

40.78

12.10

14.38

1.01

0.979

0.84

21.35

16

8.88

3.71

2.01

1.951

2.39

44.53

7.67

16.67

1.00

0.976

0.46

9.26

14

5.49

8.76

0.94

0.913

0.63

70.61

15

4.97

9.45

1.00

0.971

0.53

54.73

13

2.92

7.25

0.99

0.961

0.40

22.28

12

2.63

6.10

0.92

0.896

0.43

37.20

Weight

Average Number of Services used overall = Sum of Activities used over lifetime / Number of Customers: 1.03

5.2 Association Rules

The association rules evaluation is based on the
scenarios discussed before. We analyze the rules for
each scenario, each with confidence and support
values. Future plans have to be based on the
confidence. Such plans can be a marketing campaign,
or special offers. In this subsection we present an

analysis of two scenarios of the association rules

results.
5.2.1 Scenario 1
Scenario 1 is based on the original activities of
cluster 16 the best customer cluster. The original
activities are Flight, Financial, and Hotel. We

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conclude from the results that customers are divided

into two different categories:
o The customers using the Flight and Financial
services never use the Hotel Services.
o The customers using the Flight and Hotel
services never use the Financial Services.
A manual inspection of the data has been done. To
enhance business, we have to divide customers into
two different categories; Flight/Financial customers
and Flight/Hotel customers. Hence, two different
marketing campaigns have to be launched.
5.2.2 Scenarios 2
Scenario 2 is based on the activities of cluster 16.
The activities are mainly the sectors flown by the
customers. The sectors are restricted to the sectors
originated from the main hubs. This scenario
addresses the sectors with flown percentage over
10%. In the following, we present some interesting
rules.
o BEYDXB = 1 and BEYRUH=1
BEYCDG = 1
with support = 0.1 and confidence = 0.84. That
is, 10% of the best customers are traveling to
Beirut/Dubai, Beirut/Riyadh, and Beirut/CharlesDe-Gaulle. Hence, the airline has an opportunity
to enhance its business for customers traveling on
the sectors Beirut/Dubai, and Beirut/Riyadh such
as marketing campaigns or special offers on the
Beirut/Charles-De-Gaulle sector.

6 Summary of CRM
Recommendations
The best scenario for clustering using k-means
algorithm generated 9 different clusters with specific
profile for each one. Such information is valuable in
determining the resources the airline should commit in
order to gain and retain a customer in the event he/she
should defect. The cluster profile shows a business
opportunity in increasing the number of services
purchased by customers.
We track high-value customers. The results show
three clusters as best customers. A retention strategy
should be applied to these customers. Another result
in these clusters is providing opportunities for the
airline to produce more revenue from a customer. For
example, the airline could apply an up-selling strategy
by selling a higher fare seat.
The second type of clusters defined in this study is
the mid-range cluster. The analyst of customer
behavior would propose an enhanced strategy for
customers in these clusters in order to increase
services usage and revenue mileage per passenger.

This strategy shall define candidate services for crossselling.

The third type of clusters identified in this study is
new customer cluster. The recommendation is to
observe these customers to determine their behavior in
order to improve profitability.
The fourth type of clusters includes the bad
customers with very low revenue mileage per
passenger. The recommendation is to retain marketing
campaigns for those customers.
We have found that the best route occurs from the
CDG airport-hub. This best route helps in defining
new route market, develops marketing strategy for
customers to propose the route with low sales,
identifies customers preferable destinations, and
observes the worst route in order to take a decision:
stop it or market it more aggressively.
The association rule algorithm based on the best
customer cluster provides more results. By analyzing
the services used, we characterize services integration.
It enables the airline to serve a customer the way the
customer wants to be served based on the stated and
observed requirements of the customer.
The second use of association rules explored
routes. It allowed us to propose to customers
additional route flight tailored to the needs, behavior,
and values of the airlines most profitable customers.
Acknowledgment. This work was supported in part
by the Lebanese American University.
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